NEXTDC asks shareholders to keep the faith

 

National data centre network a massive undertaking.

NEXTDC has given investors an insight into the massive capital investment required to build its national network of independent data centres in Australia’s major capital cities.

The ASX-listed company, which recently opened its first 3000 square metre facility in the Brisbane CBD, plans to open a 17,500 square metre facility in Port Melbourne and a 6000 square metre facility in Canberra (Bruce) in the first quarter of 2012.

A 16,000 square metre facility in Sydney (Macquarie Park) and a 6000 square metre facility in Perth (Malaga) are also expected to be operational by the end of next year.

The company was established via a $20 million cash injection from founder Bevan Slattery after he sold PIPE Networks to TPG. It has since attracted close to $155 million in shareholder funding.

Today the company revealed that it would cost an avarage of $8 million to deliver 1 MW of power to a data centre.

The company intends to deliver 33 MW – pushing NEXTDC's build costs to over $264 million in addition to land and construction costs.

"It’s the nature of the beast,” the company’s chief financial officer Robin Khuda told iTnews. “Building data centres involves spending a lot of CapEx upfront, that’s the challenge.”

NEXTDC reported that it has signed on $28 million in sales to date, including managed service provider HarbourMSP, an unnamed global telco and an unnamed global content delivery network.

Beyond that, there is over $65 million of sales in the pipeline and the company has hired five additional sales staff to approach new opportunities.

Khuda said the company was “definitely not going to generate positive cash flow this year, probably not next year either.”

Large global data centre providers such as Digital Realty Trust and Equinix took three to five years to reach the utilisation rates (30 to 40 percent) required to generate positive cash flow.

But Khuda was confident shareholders understood that the short-term pain would be rewarded.

He noted that ten major customers signed on for the Brisbane facility within the first three weeks of it going live.

“It validates the demand is there, you just have to build it,” he said.

Khuda said there is a lot of noise about data centre builds in the industry, but few have the backing to proceed with builds before anchor tenants are signed.

He said NEXTDC “copped a fair bit of criticism” for going to the sharemarket rather than using debt to finance the build, but the strategy is paying off.

“We learned when we went through the GFC, you never run a project without equity, and you don’t rely on the bank. We talk to a lot of banks about data centres, but they don’t understand it, they only see it as a property play and ask real estate questions.”

Raising finance on the ASX helped “take the oxygen out of the market,” he said, as institutional shareholders have already backed one large national data centre provider in NEXTDC.

Copyright © iTnews.com.au . All rights reserved.


NEXTDC asks shareholders to keep the faith
 
 
 
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